Note: This article first appeared at NerdWallet.com. Click here to read the original.

The supposed life insurance “rule” that you should purchase a policy worth about five times your annual income doesn’t consider your unique needs. Though whole life insurance rates are higher than term life rates, the benefits of increased coverage may be worth spending a few dollars more.

About 58 million U.S. households say they need more life insurance and about 30 percent of U.S. households have no life insurance at all, according to LIMRA. Of those who said they believed they need life insurance, 86 percent haven’t purchased it due to perceived cost.

Term life insurance can be significantly less expensive to purchase than whole life insurance. However, term life insurance doesn’t offer as many financial benefits over the life of the policy. Though initial costs of term life insurance may be lower, premiums can increase after a predetermined time period, depending on the type of policy. Also, while you may be able to renew a term policy, you’ll do so at a higher premium.

Whole life insurance offers additional financial benefits including potential dividends, a cash value account and tax-free borrowing. Thus, even if you’re paying more, the increased coverage and lifetime benefits may be worth it.

No matter your situation, having whole life insurance can provide the coverage necessary to help you in this life and your family after you’re gone.

How much whole life insurance do you actually need?

To figure how much whole life insurance coverage you’ll need, you have to take a number of factors into account, including spending, your assets and your liabilities. You’ll need enough to replace your income for a period of time, cover your debt, help provide for dependents and pay off any additional future costs that may arise upon your death, such as funeral costs.

First, you need to figure out how much it costs you to live. Track your expenses and those of your spouse, children and any other dependents on a month-to-month basis.

Next, you have to make some projections that take into account potential reduced or increased costs of living, as well as projected income for both you and your spouse, including retirement payments. This total number should help protect your family’s ongoing needs, while taking increased inflation into consideration.

Finally, calculate the expenses that would arise upon your death, including the costs of a funeral, paying off debt, estate taxes, the balance of your mortgage, costs of college for children, and any other costs you can foresee.

Taking all of these present and future factors into account should help you determine your financial needs as well as the amount of whole life coverage you’ll want to purchase.

What happens if you don’t have enough coverage?

Everyday expenses may take precedence over life insurance, but not having enough coverage could saddle your loved ones with a great financial burden should you pass away.

Without proper coverage, your family could be responsible for your debt and may not have enough funds to meet costs of living or financial goals. By arranging sufficient coverage, you’re helping to prevent certain financial risks for your family and loved ones.

When you’re looking for the best whole life insurance, remember that policies pay out a sum of money to an individual beneficiary in the event of your death. The policy is in force for the entire life of the policyholder, so premiums are generally due annually, though it may be possible to pay the policy in one lump sum or over a shorter time period. The younger you are when you get your policy, the cheaper the premiums will be and the easier it will be to get approved.

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